A MONTHLY METER OF INDUSTRY TRENDS

GOOD NEWS FOR APARTMENT SELLERS

Today's multifamily market is characterized by falling cap rates in both suburban and urban sectors. Suburban multifamily cap rates declined from an average of 8.6% in 2002 to 8.04% in 2003, while urban multifamily cap rates dropped from an 8.6% average in 2002 to 8.23% in 2003.

Lowest Cap Rates in 2003

Rank

Property Type

2003 Low (%)

2003 High (%)

2003 Average

1

Suburban Multifamily

6.3%

9.5%

8.04%

2

Urban Multifamily

6.0%

10.5%

8.23%

3

Regional Mall

7.0%

10.0%

8.46%

4

Community Mall

7.3%

10.0%

8.77%

5

Neighborhood Strip Centers

7.5%

10.8%

8.90%

Source: Integra Realty Resources

DEVELOPERS SCALE BACK ON NEW CONSTRUCTION

Shrinking demand in 2003 caused many developers to curtail the number of projects in their construction pipelines. As a result, several sectors experienced a decline in construction spending between 2002 and 2003 — most notably the manufacturing sector, where construction spending declined 16.5%. Total U.S. construction spending measured $899 billion in 2003, up 4.4% from 2002's total of $861 billion.

Annual Value of Construction Spending in the U.S.

Type of Construction

2002

2003

% Change

Manufacturing

$16.9 billion

$14.1 billion

-16.5%

Office

$44.9 billion

$40.3 billion

-10.3%

Lodging

$10.8 billion

$10.7 billion

-0.9%

Amusement and Recreation

$18.9 billion

$19.1 billion

0.8%

Education

$70.5 billion

$71.2 billion

1%

Religious

$8.2 billion

$8.4 billion

1.9%

Health Care

$27.5 billion

$29.6 billion

7.4%

Source: U.S. Census Bureau

CBD VACANCIES CONTINUE TO CLIMB

Suburban office markets are on the mend, but Central Business Districts (CBDs) are still ailing. The suburban vacancy rate has declined from a peak of 19.3% in the first quarter of 2003 to 18.9% in the fourth quarter, based on a survey of 44 markets. Conversely, the CBD vacancy rate continues to drift higher, rising from 14.6% to 15% during the same period.

Metro Vacancy Rates for Selected Markets as of 4Q 2003

CBD

Suburban

Dallas

25.4%

25.7%

Los Angeles

19.6%

15.5%

Atlanta

17.9%

23.1%

Chicago

16.1%

22.6%

New York/Long Island

11.6%

9.9%

Washington, D.C.

8.4%

14.2%

Source: Grubb & Ellis

AMERICANS SEEK WARMER PASTURES

Americans' mobility patterns trend this way: What's hot is hot, especially when you look at both traditional and nouveau Sun Belt locales' magnetism for domestic movers. Technology has removed the limitations geography had long placed on business development. People used to move to where the jobs are, but now jobs and money are moving to where people want to be.